Gold is considered the top precious metal by the investment market. Most professional investors will also add gold to their portfolios when making asset allocations. Gold has a place in the history of currency. The rare gold itself has the ability to maintain value and is one of the important reserve assets of central banks around the world. In addition, due to its easy portability, good liquidity, and resistance to wear and tear, the gold market has become a safe haven for many investors' funds. So what factors are more likely to affect the widely watched gold price? Here are a few simple categories.

1. 1. US dollar trend

Regardless of the US dollar, US bonds and gold, they are all considered traditional safe-haven assets. In the financial market, gold is mostly denominated in US dollars, and the two are substitutes, so in the long-term trend, the two have a certain degree of negative correlation. Therefore, the US economic situation and the interest rate trend of the Federal Reserve are both major factors affecting the price of gold. Most of the time, the strength of the US dollar directly affects the attractiveness of gold.

2. 2. Global interest rate expectations

The legal tender in the world has no intrinsic value, but can bring interest income. In contrast, the yellow metal is an interest-free asset, and its value-preserving function is mainly reflected by its intrinsic value. In other words, general interest income is the opportunity cost of investing in gold, which can affect the demand for gold. For example, when central banks of various countries introduce monetary easing policies, investors believe that the increase in money supply will reduce the purchasing power of cash and cause inflation. In order to preserve value, investors tend to hold gold with anti-inflation characteristics, which pushes up the price of gold. Of course, any measure that directly reduces the central bank's interest rate can push up the price of gold.

If the economy continues to expand and inflation remains high, or even hyperinflation, the central bank will mostly take the approach of raising interest rates to curb it. When interest rates rise, investors may be more attracted to depositing money in banks or chasing other high-yield assets, which may cause gold prices to fall.

3. 3. Geopolitics

When geopolitical tensions arise, some possible or already occurring wars or emergencies (such as terrorist attacks) will stimulate risk aversion in the market. If investors expect political and economic instability, worry about the impact on the economy and resource supply, and the decline in the attractiveness of fiat currencies, they will hold gold for risk aversion. However, this kind of gold price rise is often only short-term, and the reaction is sometimes too large. When the unknown situation gradually becomes clear, the gold price will give up the increase.

4. 4. Global central bank reserves

Gold reserves are limited. After the collapse of the Bretton Woods system, although the status of the US dollar has not changed much, many central banks still need to hold gold to support the issuance of their own currencies and hedge against the risk of US dollar depreciation. Therefore, the increase or decrease in gold reserves by central banks of various countries will affect the price of gold.

The above mentioned factors are only some of them. There are many other factors that affect the gold price in terms of supply and demand, and the prices of different commodities and stock market trends will also affect each other. As we all know, gold is no longer important in industrial use, but its position in the investment market cannot be ignored. However, market behavior still changes frequently, and investors still need to observe it at all times.